This chapter is devoted to the special problems encountered by nations that are heavily dependent on a small group of commodities, or, in the extreme case, reliant on a single commodity (monoeconomies). I begin by discussing the measures of commodity dependence and define the monoeconomies in the process. I then turn to exploring the problems of export instability, of fiscal extraction, and of exchange rate policies that often arise in commodity-dependent countries. I finally deal with the Dutch Disease and the resource curse, two ailments of particular significance to monoeconomies.

Measurement of commodity dependence

The degree of national dependence on primary commodities can be measured in a variety of ways. One can alternatively try to establish the share of the commodity sector in GDP, or in investments, employment, government income, or exports. The nature of the production and consumption of a specific commodity composition will influence the level of the alternative measures. Among commodities accounting for an equal share of GDP, one that is capital intensive (petroleum extraction) will normally account for a higher share of investments and a lower share of employment than another that is labor intensive (coffee). All else alike, the share of government revenue will vary with the generation of rent in the production of a specific commodity. Even when dependence measured by the share of GDP or of employment is high, the export dependence could be limited if most of the commodity is consumed at home (rice in Bangladesh).